“Flexible Enforcement” Comes to an End for Mortgage Servicers
Time’s up for the pandemic-driven mortgage servicing flexibility related to Regulation X.
In a joint statement issued in November, the Consumer Financial Protection Bureau (CFPB), the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (FDIC) – among other state and federal regulatory agencies – announced that their temporary supervisory and enforcement flexibility had come to an end.
Why Are the Agencies Resuming Supervisory and Enforcement Action?
In April 2020, the agencies issued a joint statement announcing the flexibility and their reason for implementing it. They stated that their intention was to enable servicers to more easily assist borrowers in obtaining short-term mortgage payment relief or repayment plans to offset financial hardships during the pandemic-fueled economic crisis.
The statement explained that the agencies would avoid taking supervisory or enforcement action against mortgage servicers for failing to meet certain deadline and notification requirements under Regulation X. It stated that the agencies would provide this flexibility to servicers until further notice as long as there was a prevalent effort to provide borrowers with the assistance they need.
After over a year and a half, that “further notice” has come. Why? According to their November statement, the agencies believe that “servicers have had sufficient time to adjust their operations, by among, other things, taking steps to work with consumers affected by the COVID-19 pandemic and developing more robust business continuity and remote work capabilities.”
What Does This Mean for Mortgage Servicers?
The resumption of all mortgage servicing supervisory and enforcement practices during a time when millions of borrowers are exiting forbearance makes for a high-pressure period for servicers.
As the CFPB began warning earlier this year as millions of borrowers began exiting mortgage forbearance programs, the agency intends to exercise close scrutiny of how servicers are working with borrowers to prevent unnecessary foreclosures.
In a separate statement issued by the CFPB, Director Rohit Chopra referenced the servicing and regulatory failures that contributed to the 2007-2008 economic crisis. “Regulators have learned their lesson, and we will be scrutinizing servicers to ensure they are doing all they can to help homeowners and follow the law,” Chopra said.
The return to full enforcement means servicers must now assist borrowers struggling with pandemic-related challenges, handle the surge of forbearance exits, and meet all requirements stated in the Regulation X mortgage servicing rules.
How Can Mortgage Servicers Ensure Compliance?
Worried about achieving all of the above? The right servicing quality control (QC) partner can help!
At MetaSource, our servicing QC services are a great way to restore peace of mind in your processes in a time of heightened enforcement.
Gaps in QC processes are a source of unnecessary inefficiency and stress. And during a period when regulators are looking to hold servicers accountable for anything less than the most diligent efforts to help troubled borrowers avoid foreclosure, gaps are particularly harmful.
If your QC processes are not up to the job, MetaSource can help. We have a team of mortgage professionals who have deep expertise in helping servicers improve their compliance. We have what you need to close the gaps and ensure compliance during this stressful time.
Give us a call to learn how reliable mortgage servicing QC expertise can help your company now and in the future.